The war in Ukraine and resulting sanctions on Russia create new obstacles for shippers worldwide—magnifying the importance of a conflict response for the supply chain. Experts warn these sanctions on Russian banks, oil refineries, and military exports could have consequences here at home, especially regarding gas prices. That means supply chain managers must now prepare for what might happen next.
The Ukrainian war and the supply chain
Russia and Ukraine are two of the top energy providers globally, affecting manufacturing and transportation costs—and gas prices at the pump. It may be the most significant example of the need for conflict response for the supply chain since the onset of the war, as fuel costs have risen dramatically.
With newly imposed trade sanctions and export controls on Russia, many companies will also need to stop all shipments to Russia immediately. Even when companies can legally ship to Russia, economic sanctions may make it impossible for some shippers to collect payment from Russian clients. Big Tech has gotten involved with sanctions to prevent Russian bank customers from using Apple Pay or Google Pay.
A further indication of a need for a conflict response within the supply chain is that suppliers have limited mobility when critical public infrastructure is shut down or damaged by war. For example, Odesa’s Ukrainian Black Seaport is currently not operating, so shipments to Ukraine are diverted.
The conflict is also increasing ocean freight rates, and it’s yet to be determined whether rail transportation in Eastern Europe will be a safe option. In addition, Ukrainian airspace has been shut down, and E.U. airspace is closed to Russian aircraft. It’s plain to see why transportation costs across the board are increasing, consequently impacting the entire supply chain.
Past wartime trends as indicators
Shippers and concerned global citizens have their eyes on Europe to guess what might happen next. It could be a cyberattack or more sanctions. The conflict could also broaden to involve other countries, affecting other critical infrastructures and increasing the need for a conflict response for the supply chain.
Yet another consequence is that stock levels may become increasingly unstable, and banking restrictions may prohibit many shippers and suppliers from participating in the global economy. The overall impact on shipping is yet to be determined. But, in recent international conflicts, the trend has been that when war affects the supply chain, transportation costs will continue to rise.
Increasing visibility in times of crisis
Thoughtful logistics management is always essential; in times of war, even more so. Shippers cannot always rely on long-term carrier relationships or routes. By proactively incorporating visibility tools into logistics platforms, shippers can monitor risks better and adapt their supply chains accordingly.
CTSI-Global’s HoneyBee TMS provides a load optimization tool that allows for dynamic modeling of shipments, route optimization, order aggregation, and real-time tracking. Honeybee TMS also incorporates tools for carrier communication and spot quote management, providing continuous access to over 20,000 shippers. Agile supply chain models are adaptable with virtual integration and predictive analytics implementation.
As the Ukraine war affects the supply chain, resilient supply chains must continue to adapt. Contact CTSI-Global to discuss your company’s conflict response plan.
Posted March 15, 2022